Regulation to protect consumers or investors?

DEUN

Regulation to protect consumers or investors?

Our electricity legislation says that its purpose is first and foremost to protect consumers. But the Institute for the Study of Competition and Regulation (ISCR) says something quite different.

This Institute is important because it has a great deal of influence in the New Zealand policy community – this is typical of capital city think-tanks worldwide.

The Electricity Act requires the Electricity Commission to consider benefits to “all classes of consumers”. The Act specifies desired outcomes, one of which is that “delivered electricity costs and prices are subject to sustained downward pressure”.

However, an article titled ‘Are competition and regulation two sides of the same governance coin?’ published in the March 2009 ISCR newsletter* states that the main objective of competition is to promote business efficiency, leading to greater investor welfare [emphasis added]. The article also says that regulation seeks to directly promote investor protection in a prescriptive way.

This is in stark contrast to the single purpose of the Commerce Act: “to promote competition in markets for the long-term benefit of consumers within New Zealand [emphasis added].

Small consumers have had no answers to their complaints about poor electricity outcomes; a situation which increasingly transfers wealth to investors.

Who is the electricity industry for? Investors? Consumers? These questions lie at the heart of the debate on electricity restructuring.

DEUN contends that electricity is an essential service, despite The Commerce Act 1986 that removed this view and made electricity just like any other product.

After over a decade of challenges in courts, the Privy Council confirmed that because Parliament decided that competition not regulation should protect consumers, only Parliament can undo that decision.

Submissions on The Electricity Industry Bill are now open. This is a once-in-a-decade opportunity for Parliament to restore the concept of electricity as an “essential service”, so that consumer protection can not be overridden by regulation that promotes investor welfare.

*Please note that you have to download the newsletter to read the article